The United States Social Security program was founded on August 14, 1935, during the administration of President Franklin D. Roosevelt, and was designed in the context of its time to provide economic security to senior citizens, and disabled citizens of any age, through retirement, disability insurance and survivors insurance.
Although it has been in existence for more than 90 years, the Social Security program needs constant changes to adjust to the changes of time, and so that the positive impact of benefits remains sufficient for people to maintain a good quality of life. In this framework, a new change that came into effect in 2024 could affect Social Security beneficiaries, and if you are one of them, you should be aware in case you have to make decisions or measures about it.
The Social Security Earnings-Test Limit Increment
The Social Security Administration (SSA) allows people to have income from their work in conjunction with their benefits at the same time. However, if these individuals are working before full retirement age, certain income limits could lead to benefit withholding. For example, in the year 2024, the base limit is $22,320, and if that limit is exceeded, $1 will be withheld for every $2 of additional income.
If an individual works before retirement age, but will reach it later in the year, the income limit is higher, as high as $59.520 in the 2024 fiscal year. If this limit is exceeded, $1 will be withheld from Social Security for every $3 of additional income.
Now, don’t panic: Benefits withheld by the SSA aren’t money you lose forever; they’re added back in once you reach full retirement age. However, claiming Social Security benefits before full retirement age involves a sharp and permanent reduction in monthly payments. Therefore, it is a momentous decision to balance income to avoid a withholding of benefits and maximize your long-term financial security, when it comes to starting to enjoy your retirement.
The Salary Cap Increased in the Social Security Program
The Social Security program is financed, to a large extent, from the contributions of workers in the form of payroll taxes. Every year, the SSA sets a salary cap that determines how much income is taxed to fund the program. In 2024, the salary cap is $168,600, up from $160,200 in 2023. So, if you have a higher income, you will probably have to pay a little more this year compared to last.
We have to be aware of what happens in Congress, since a group of legislators has proposed raising or eliminating the salary limit so that all US workers contribute to Social Security on all their incomes. If you don’t like the idea of paying taxes on an extra $8,400, think of it this way: Things could get (a lot) worse, so be thankful you’re only considering this year’s change.
For now, these are the relevant changes that you have to keep an eye out for, but stay tuned because more changes could be coming this year or next, and the Social Security taxes you pay might change. Stay tuned with us because we will update the status.
